June 2001
Intermediate to advanced
276 pages
8h 1m
English
Content preview from Advanced Modelling in Finance Using Excel and VBABecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.
Chapter 8. Performance Measurement and Attribution
The broad objective of performance measurement is to assess and compare the performance (past returns) of different investment strategies. Our main emphasis in this chapter will be on the choice between passive and active investment strategies when assembling a portfolio of risky assets. The secondary emphasis will be on choosing the level of risk-free assets to complement the chosen risky portfolio.
Under a pure passive investment strategy, an investor holds a portfolio that is an exact copy (by component shares and weights) of the market index. The passive investor does not rely on superior information and, apart from rebalancing when the constituents of the index change, there is no trading. The passive investor is rewarded for bearing market risk and will achieve the market return less the unavoidable trading costs.
In contrast, under an active investment strategy the investor's portfolio differs from the market index by having different weights in some or all of the shares in the market index. The active investor relies on having superior information and is prepared to incur much greater trading costs than the passive investor. In practice, only a few active investors outperform the returns from passive investment in the long term, since they bear specific risk and incur greater trading costs. With the increasing complexity of active strategies, the need for more sophisticated benchmarks and performance measurement is becoming ...
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.
Read now
Unlock full access
More than 5,000 organizations count on O’Reilly
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.Julian F.
I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.Addison B.
I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.Amir M.
I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.